|a form in which changes caused by transactions are recorded
|the set of accounting procedures performed in each accounting period.
|The period of time covered by the financial statements. AKA "fiscal period"
|Accural basis of accounting
|The system under which revenue is recorded when earned and expenses are recorded when incurred.
|Balance Sheet Equation
|Assets = Liabilities + Owner's Equity
|the cost of an asset minus the accumulated depreciation
|Business Equity Principle:
|states that each business is considered a separate entity, and the financial data for the business must be kept separate from the owner's personal financial data.
|an account that reduces the value of the account it is "linked" to.
|States that assets must be shown on the balance sheet using the cost the were purchased for.
|Credit Invoice (source document)
|issued by the seller to the customer for returned goods (for credit)
|current assets _______________ current liabilities
|Total Liabilities ________________ Total Assets
|Declining balance depreciation:
|Method of calculating depreciation Book Value = Cost − Accumulated Depreciation Then multiply that by the rate.
|Double entry accounting:
|a system of accounting where debits must equal credits for each transaction
|Owner's Equity ______________ Total Assets
|a partnership where all partners have unlimited liability.
|General Accepted Accounting Principles. Standard accounting rules and guidelines
|a form of partnership where there is a limited partner (with limited personal liabilities) and a general partner.
|States that expenses for a fiscal period must match the revenue generated in that same period to give an accurate net income.
|Principle of Materiality:
|states that information that could affect the decisions of users of financial statements should be included when financial statements are prepared.
|Merchandise Turnover Formula
|Cost of Goods Sold __________________ Average Inventory
|Principle of Objectivity:
|States that accounting records should be based on the objective evidence provided by source documents to support the values used in recording transactions.
|Periodic Inventory Method:
|merchandise purchases are recorded in the purchases account, and the inventory account balance is updated only at the end of each accounting period (Has purchase returns)
|Perpetual Inventory Method:
|Requires a continuous record of all merchandise on hand updated when ever a transaction occurs. COGS is an account
|Petty Cash fund:
|an amount of cash used to make small payments. All payments must be matched to a voucher
|Cash - Accounts Rec. - Stocks/Bonds _______________________________ Current Liabilites
|Bank Reconciliation Statement:
|Brings the banks records into agreement with your own records.
|Time Period Principle:
|The definite and consistent used of the same accounting period.